The Government has changed the time period for the new IR35 'off-payroll' rules so that they will now only apply to payments made for services provided on or after April 6 2020. This has effectively removed the 'retrospective' nature of the proposed changed.

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The Government instigated a review of the controversial rules folowing a series of election pledges. One common issue raised over the course of the review was businesses’ concerns over what payments the rules apply to and from when.

The new IR35 ruleswill now apply only to payments made for services provided on or after April 6, 2020. Previously, the rules would have applied to any payments made on or after April 6, 2020, regardless of when the services were carried out. It means organisations will only need to determine whether the rules apply for contracts they plan to continue beyond April 6, 2020.

HMRC has announced this change ahead of the publication of the Government’s review which is due to conclude in February.

Reaction
Industry reaction was mixed - some saw it as 'little comfort' while others expressed 'relief'.

Little comfort
Freelancer group, IPSE, thought the amendment was 'sensible' but would be of 'little comfort' to self-employed people already facing losing their contracts because of the legislation.

IPSE is still campaigning for the Government to halt the changes while a full and independent review is carried out and also raising awareness about what the changes could mean for contractors and the self-employed.

Andy Chamberlain, from IPSE said: “As we approach the April deadline, HMRC are starting to realise just how difficult these rules will be for businesses to implement. Delaying the start date to when the work is actually performed, rather than paid for, is a sensible move, but it doesn’t address the fatal flaws in the legislation itself.

“This minor amendment will be little comfort, therefore, to the many contractors already being laid off by companies who are panicking about the approaching changes. We are still campaigning hard for the Government to halt the IR35 changes while a full and independent review is carried out into the very serious risks for hundreds of thousands of contractors, the businesses they work with and the economy as a whole.”

Eleventh hour
IR35 tax specialists, Qdos, thought it was an 'eleventh hour' change which was more of a 'tweak'

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Seb Maley, from Qdos said: “The reform was due to apply to payments made on or after April 6, which would take into account work completed in March. The Government has now changed its mind at the eleventh hour so that changes will apply to payments made for work carried out on or after this date.

“The Government claims it is taking ‘early action’, but with less than two months to go until the reform arrives, this is a last-minute change that could easily confuse businesses further - albeit a tweak to the rules that gives agencies and end-clients a few extra weeks to prepare.

“Most businesses impacted by reform have spent time and money making arrangements to take into account the original rules. Nonetheless, our advice to agencies and end-clients is to use this time wisely - communicate with the contractors you place and conduct well-informed and case-by-case IR35 assessments.”

Relief
Accountancy firm, Grunberg & Co was more positive and thought it would be bring a 'sense of relief'.

Nimesh Patel from Grunberg & Co, said: “HMRC’s review and its new decision will provide a sense of relief to many contractors, agencies and the end clients that engage their services, as it means that the rules will not be applied retrospectively to previous works conducted before April 6 2020. Many feared that work or projects that ended before this date could be included within the off-payroll rules if payments related to this work were made after its introduction, but this will no longer be the case.

“This will help contractors to better budget for the changes, but may add additional complexity to the calculation of payments on projects that bridge the change of rules.

“However, it is clear that any new projects or work that starts or continues beyond April 6 2020 in the private sector must abide by the IR35 rules where a person is deemed to be bound by them and so contractors and engagers should seek professional advice to ensure payments, tax and NICs are calculated correctly.

“Where a contractor is deemed to be under IR35 it is likely to result in a significant drop off in income, so they must consider their current and future working arrangements.”

Further IR35 information
For more information about all aspects of IR35, including the controversial IR35 reforms see Shout99's News on IR35 section.